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Hi Hank. I'm still alive and well. I stopped posting on the VMC boards because they all went premium as I recall (?).
Do you have a link for the VMC Zip Code board? I thought I had that one bookmarked but I don't see it anymore in my favorites.
rogue
OK now I get it.
Out-of-control rising health care costs are good for you Zab and your stock prices.
Incredible how did I not see that was such a wonderful thing???
Good post although it is extremely scary.
The "healthcare" situation continues to get dire and will get worse. I wish it wasn't so but I see nothing to stop the insanity,
Be afraid...be very afraid.
<<"If Obama wanted to clean up health care--- why is this the reality??
Wolf in sheeple cloth......?
Some day people will wake up...
Maybe some fine day we will have real choice in our leadership...
Not a done deal.
Monsanto right & Monsanto left...">>
The brutal truth is they don't care about us. I think they'd prefer to see us sick, broken, bankrupt and dead.
Be afraid....be very afraid.
Study estimates Obamacare could raise individual claim costs 32 percent
http://www.washingtonguardian.com/study-health-overhaul-raise-claims-cost-32-pct-1
Actuaries groups offers sobering look at the rising costs for individual insurance coverage plans under Obama health law
UPDATED 22:58 PM EDT, MARCH 26, 2013 | BY JOHN SOLOMON
One of the nation's premier experts in numbers has a tough diagnosis for President Barack Obama's health care law.
In a report that could prove a big political headache for the administration, the Society of Actuaries estimated Tuesday that insurers will have to pay out an average of 32 percent more for claims on individual health policies under the Affordable Care Act, a cost likely to be passed on to consumers.
While some areas will see declines in medical claims costs, the report predicts the majority of states will see double-digit increases in their individual health insurance markets, where people purchase coverage directly from insurers rather than get coverage from employers.
By 2017, the estimated increase would be 62 percent for California, about 80 percent in Ohio and Wisconsin, more than 20 percent for Florida and 67 percent for Maryland. Much of the reason for the higher claims costs is that sicker people are expected to join the pool, the report said.
The report did not make similar estimates for employer plans, the mainstay for workers and their families. That's because the primary impact of Obama's law is on people who don't have coverage through their jobs.
The report also predicts the law will reduce the number of Americans without health insurance from 16.6 percent to between as low as 6.6 percent after three years.
The Associated Press has a good summary of the debate the report generated. Here's what AP had to say:
The administration questions the design of the study, saying it focused only on one piece of the puzzle and ignored cost relief strategies in the law such as tax credits to help people afford premiums and special payments to insurers who attract an outsize share of the sick. The study also doesn't take into account the potential price-cutting effect of competition in new state insurance markets that will go live on Oct. 1, administration officials said.
At a White House briefing on Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."
A prominent national expert, recently retired Medicare chief actuary Rick Foster, said the report does "a credible job" of estimating potential enrollment and costs under the law, "without trying to tilt the answers in any particular direction."
"Having said that," Foster added, "actuaries tend to be financially conservative, so the various assumptions might be more inclined to consider what might go wrong than to anticipate that everything will work beautifully." Actuaries use statistics and economic theory to make long-range cost projections for insurance and pension programs sponsored by businesses and government. The society is headquartered near Chicago.
Kristi Bohn, an actuary who worked on the study, acknowledged it did not attempt to estimate the effect of subsidies, insurer competition and other factors that could mitigate cost increases. She said the goal was to look at the underlying cost of medical care.
"Claims cost is the most important driver of health care premiums," she said.
"We don't see ourselves as a political organization," Bohn added. "We are trying to figure out what the situation at hand is."
On the plus side, the report found the law will cover more than 32 million currently uninsured Americans when fully phased in. And some states — including New York and Massachusetts — will see double-digit declines in costs for claims in the individual market.
Uncertainty over costs has been a major issue since the law passed three years ago, and remains so just months before a big push to cover the uninsured gets rolling Oct. 1. Middle-class households will be able to purchase subsidized private insurance in new marketplaces, while low-income people will be steered to Medicaid and other safety net programs. States are free to accept or reject a Medicaid expansion also offered under the law.
Obama has promised that the new law will bring costs down. That seems a stretch now. While the nation has been enjoying a lull in health care inflation the past few years, even some former administration advisers say a new round of cost-curbing legislation will be needed.
Bohn said the study overall presents a mixed picture.
Millions of now-uninsured people will be covered as the market for directly purchased insurance more than doubles with the help of government subsidies. The study found that market will grow to more than 25 million people. But costs will rise because spending on sicker people and other high-cost groups will overwhelm an influx of younger, healthier people into the program.
Some of the higher-cost cases will come from existing state high-risk insurance pools. Those people will now be able to get coverage in the individual insurance market, since insurance companies will no longer be able to turn them down. Other people will end up buying their own plans because their employers cancel coverage. While some of these individuals might save money for themselves, they will end up raising costs for others.
Part the reason for the wide disparities in the study is that states have different populations and insurance rules. In the relatively small number of states where insurers were already restricted from charging higher rates to older, sicker people, the cost impact is less.
"States are starting from different starting points, and they are all getting closer to one another," said Bohn.
The study also did not model the likely patchwork results from some states accepting the law's Medicaid expansion while others reject it. It presented estimates for two hypothetical scenarios in which all states either accept or reject the expansion.
Larry Levitt, an insurance expert with the nonpartisan Kaiser Family Foundation, reviewed the report and said the actuaries need to answer more questions.
"I'd generally characterize it as providing useful background information, but I don't think it's complete enough to be treated as a projection," Levitt said. The conclusion that employers with sicker workers would drop coverage is "speculative," he said.
Another caveat: The Society of Actuaries contracted Optum, a subsidiary of UnitedHealth Group, to do the number-crunching that drives the report. United also owns the nation's largest health insurance company. Bohn said the study reflects the professional conclusions of the society, not Optum or its parent company.
___
AP White House Correspondent Julie Pace contributed to this report.
Online:
Society of Actuaries __ http://www.soa.org/NewlyInsured/
Interesting program tonight on Coast To Coast radio at midnight CST...
Nuclear Power Special
Sat 03-23
While the mainstream media continues to ignore reporting on the real dangers of the Fukushima nuclear plant disaster, John B. Wells is on top of the story. He'll be joined by four nuclear experts throughout the evening-- Arnie Gundersen, Kristen Iversen, Steven Starr, and Scott Portzline. They'll discuss how nuclear power plants are being compromised, and a Fukushima type incident in the US might be right around the corner.
http://www.coasttocoastam.com/
http://www.theatlantic.com/business/archive/2013/03/this-is-america-now-the-dow-hits-a-record-high-with-household-income-at-a-decade-low/273719/
This is America, Now: The Dow Hits a Record High With Household Income at a Decade Low By Matt Phillips
The last time the dow was here Then and now
GDP Growth: Then +2.5%; Now +1.6%
Regular Gas Price: Then $2.75; Now $3.73
Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
Americans On Food Stamps: Then 26.9 million; Now 47.69 million
Size of Fed's Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
US Deficit (LTM): Then $97 billion; Now $975.6 billion
Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
http://www.zerohedge.com/news/2013-03-05/last-time-dow-was-here?page=1
<<"Seven billion people now, 10 billion coming soon, thats not rose colored glasses, thats a reality.">>
The entire globalist agenda is not going to let that happen. I doubt they will ever let the population get that high.
You obviously have never heard of John P. Holdren (???) and his Agenda and why he was named as the US "Science and Technology Czar"??
Watch this if you don't believe me...
<<"Seven billion people now, 10 billion coming soon, thats not rose colored glasses, thats a reality.">>
I wouldn't bet the farm on that one! GMO food anyone??
http://jonrappoport.wordpress.com/2013/03/01/monsanto-and-the-fda-2-crime-families-working-a-trillion-dollar-hustle/
Monsanto and the FDA: 2 crime families working a trillion-dollar hustle
by Jon Rappoport
March 1, 2013
www.nomorefakenews.com
Perhaps you remember the ill-fated Just-Label-It campaign. A number of activist groups petitioned the FDA for a federal regulation that would make labeling GMO food mandatory.
The petition amassed over a million signatures. But the FDA decided only 394 of these were legitimate, because all the others were electronically submitted in one document.
Infuriating? Of course. But that was nothing. Let’s get down to the core of the crime.
Imagine this. A killer is put on trial, and the jury, in a surprise verdict, finds him not guilty. Afterwards, reporters interview this killer. He says, “The jury freed me. It’s up to them. They decide. That’s what justice is all about.”
Then the press moves along to members of the jury, who say: Well, we had to take the defendant’s word. He said he was innocent, so that’s what we ruled.
That’s an exact description of the FDA and Monsanto partnership.
When you cut through the verbiage that surrounded the introduction of GMO food into America, you arrive at two key statements. One from Monsanto and one from the FDA, the agency responsible for overseeing, licensing, and certifying new food varieties as safe.
Quoted in the New York Times Magazine ( October 25, 1998, “Playing God in the Garden”), Philip Angell, Monsanto’s director of corporate communications, famously stated: “Monsanto shouldn’t have to vouchsafe the safety of biotech food. Our interest is in selling as much of it as possible. Assuring its safety is the FDA’s job.”
From the Federal Register, Volume 57, No.104, “Statement of [FDA] Policy: Foods Derived from New Plant Varieties,”here is what the FDA had to say on this matter: “Ultimately, it is the food producer who is responsible for assuring safety.”
The direct and irreconcilable clash of these two statements is no accident. It’s not a sign of incompetence or sloppy work or a mistake or a miscommunication. It’s a clear signal that the fix was in.
Passing the buck back and forth was the chilling and arrogant strategy through which Pandora’s box was pried opened and GMO food was let into the US food supply.
In order for this titanic scam to work, the media had to cooperate. Reporters had to be a) idiots and b) sell-outs.
With few exceptions, reporters and their editors let the story rest there, as a “he said-he said” issue. No sane principled journalist would have cut bait at that point, but who said mainstream reporters are sane or principled?
Underneath the Monsanto-FDA buck-passing act, there was a conscious deal to give a free pass to GMO crops. This had nothing to do with science or health or “feeding the world.” It was about profits. It was also about establishing a new monopoly on food.
Not only would big agribusiness dominate the planet’s food supply, it would strengthen its stranglehold through patents on novel types of seeds which were technologically engineered.
It’s very much like saying, “A cob of corn is not a plant, it’s a machine, and we own the rights to every one of those yellow machines.”
How was Monsanto able to gather so much clout?
There was one reason and one reason only. Putting the world’s food supply into fewer hands was, and is, a major item on the Globalist agenda. If it weren’t, the FDA-Monsanto scam would have been exposed in a matter of weeks or months.
Major newspapers and television networks would have attacked the obvious con job like packs of wild dogs and torn it to pieces.
But once the scam had been given a free pass, the primary corporate-government tactic was to accomplish a fait accompli, a series of events that was irreversible.
In this case, it was about gene drift. From the beginning, it was well known that GMO plants release genes that blow in the wind and spread from plant to plant, crop to crop, and field to field. There is no stopping it.
Along with convincing enough farmers to lock themselves into GMO-seed contracts, Monsanto bought up food-seed companies in order to engineer the seeds…and the gene-drift factor was the ace in the hole.
Sell enough GMO seeds, plant enough GMO crops, and you flood the world’s food crops with Monsanto genes.
Back in the 1990s, the prince of darkness, Michael Taylor, who has moved through the revolving door between the FDA and Monsanto several times, and is now the czar of food safety at the FDA—Taylor said, with great conviction, that the GMO revolution was unstoppable; within a decade or two, an overwhelming percentage of food grown on planet Earth would be GMO.
Taylor and others knew. They knew about gene drift, and they also knew that ownership of the world’s food, by a few companies, was a prime focus for Globalist kings who intended to feed the population through Central Planning and Distribution.
“We feed these people; we hold back food from those people; we send food there; we don’t send food here.”
Control food and water, and you hold the world in your hand.
Here is evidence that, even in earlier days, Monsanto knew about and pushed for the Globalist agenda. Quoted by J. Flint, in his 1998 “Agricultural Giants Moving Towards Genetic Monopolism,” Robert Fraley, head of Monsanto’s agri-division, stated: “What you are seeing is not just a consolidation of [Monsanto-purchased] seed companies. It’s really a consolidation of the entire food chain.”
And as for the power of the propaganda in that time period, I can think of no better statement than the one made on January 25th, 2001, by the outgoing US Secretary of Agriculture, Dan Glickman. As reported by the St. Louis Post-Dispatch, Glickman said:
“What I saw generically on the pro-biotech side was the attitude that the technology was good and that it was almost immoral to say that it wasn’t good, because it was going to solve the problems of the human race and feed the hungry and clothe the naked. And there was a lot of money that had been invested in this, and if you’re against it, you’re Luddites, you’re stupid. There was rhetoric like that even here in this department. You felt like you were almost an alien, disloyal, by trying to present an open-minded view on some of these issues being raised. So I pretty much spouted the rhetoric that everybody else around here spouted; it was written into my speeches.”
Glickman reveals several things in these remarks: he was spineless; people at the Dept. of Agriculture were madly buying into the Monsanto cover story about feeding the world; and there had to be a significant degree of infiltration at his Agency.
The last point is key. This wasn’t left to chance. You don’t get a vocal majority of Dept. of Agriculture personnel spouting the Monsanto propaganda merely because the fairy tale about feeding the world sounds so good. No, there are people working on the inside to promote the “social cause” and make pariahs out of dissenters.
You need special background and training to pull that off. It isn’t an automatic walk in the park. This is professional psyop and intelligence work.
I’ve done some investigation of various groups on both the left and the right, and I’ve seen some pros in action. They’re good. They know how to leverage ideas and slogans and ideals. They know how to defame opponents and find just the right words to sink them. They know how to turn high-flying but vague words about “humanity” into moral imperatives.
This isn’t rinky-dink stuff. To tune up bureaucrats and scientists, you have to have a background in manipulation. You have to know what you’re doing. You have to be able to build and sustain support, without giving your game away.
Truth be told, governments are full of these pros, who will take any number of causes and turn them into what falsely sounds like good science, good government, good morality, all the while knowing that, on the far shore, sits the real prize: control.
These psyop specialists are hired to help make overarching and planet-wide agendas come true, as populations are brought under sophisticated and pathological elites who care, for example, about feeding the world as much as a collector cares about paralyzing and pinning butterflies on a panel in a glass case.
Here is David Rockefeller, writing in his 2003 Memoirs:
Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure—one world, if you will. If that is the charge, I stand guilty, and I am proud of it.”
The Globalists play for keeps.
Owning the food of the world is part of their strike-force action plan, and Monsanto is the technocratic arm of that plan.
Meanwhile, the controlled press treats the whole sordid Monsanto story with its time-honored policy of “he said-he said.” This policy dictates that stories merely present both sides of a conflict without drawing conclusions.
It applies across the board—except when it doesn’t. For example, for reasons too complex to go into here, the Washington Post decided to suspend its policy in the Watergate case. Woodward and Bernstein were assigned to investigate what was going on behind White House denials and obfuscations.
The same thing could be done with Monsanto, and it would be far easier. The lies and crimes and cover-ups are everywhere. You could wear sunglasses and find them in the dark.
The NY Times and the Washington Post could sell millions more papers on the back of the Monsanto story alone. It would be a bonanza for them. But no. They don’t care. They’d rather keep declining and losing readers. They’d rather die.
Normally, a business doesn’t commit suicide, especially when it sees exactly how to resuscitate itself. But here we are dealing with an agenda which can’t be disturbed. Globalism, and its agri-techno partner, Monsanto, are creating a planetary future. Major media are part and parcel of that op. They are selling it.
Even as their bottom lines erode, these newspapers and television networks have to stay on their present course. By pretending they’re reporting the real news, they’re giving the impression that Monsanto and the FDA are home free.
Again, we aren’t talking about sloppy reporting or accidental omissions of fact or boggling incompetence or ignorance about science. We are talking about conscious intent to deceive.
Yes, now and then the controlled media will release a troubling piece about Monsanto. But placement and frequency are everything. How often do these stories run? Do they run as the lead or do we find them on page 7? Are reporters assigned to keep pounding on a basic story and reveal more and more crimes? Does the basic story gather steam over the course of weeks and months?
These are the decisions that make or break a story. In the case of Monsanto and the FDA, the decisions were made a long time ago.
The heart and soul of THE MATRIX REVEALED are the text interviews I conducted with Matrix-insiders, who have first-hand knowledge of how the major illusions of our world are put together. One of those Matrix-insiders is ELLIS MEDAVOY, master of PR, propaganda, and deception, who worked for key controllers in the medical and political arenas. 28 interviews, 290 pages.
One of the two bonuses in THE MATRIX REVEALED is my complete 18-lesson course, LOGIC AND ANALYSIS, which includes the teacher’s manual and a CD to guide you. I was previously selling the course for $375. This is a new way to teach logic, the subject that has been missing from schools for decades. For more information on how increasing your command of Logic can help you navigate your convictions more clearly, see the FREE article I wrote entitled “Matrix programming 101: destroy logic”.
Part of every new reporter’s training, if he has any ideals at all, is marching into his editor’s office with his hair on fire demanding to be given an assignment to expose a crime. The editor, knowing the true agenda of his newspaper or television network, tells the reporter:
“We’ve already covered that.”
“It’s old news.”
“People aren’t interested in it.”
“It’s too complicated.”
“The evidence you’re showing me is thin.”
“You’ll never get to the bottom of it.”
“The people involved won’t talk to you.”
And if none of those lies work, the editor might say, “If you keep pushing this, it would be bad for your career. You’ll lose access for other stories. You’ll be thought of as weird…”
This is how the game works at ground level. But make no mistake about it, the hidden agenda is about protecting an elite’s op from exposure.
If NBC, for example, gave its golden boy, Brian Williams, the green light, he would become an expert on Monsanto in three days. He’d become a tiger. He’d affect a whole set of morally outraged poses and send Monsanto down into Hell.
Don’t misunderstand. Brian hasn’t been waiting to move in for the kill. He’s a neutral entity. Wind him up and point to a target and he’ll go there.
But no one will point him at Monsanto or the FDA.
All the major reporters at news outlets and all the elite television anchors are really psyop specialists. It’s just that most of them don’t know it.
One outraged major reporter who woke up and got out of the business put it to me this way: When he was in the game, he looked at the news as a big public restroom. His one guiding principle was: Don’t piss on your shoes. Stand closer to the urinal. Pissing on your shoes was covering a story that was considered out of bounds. If you pissed on your shoes and walked into the boss’s office, he’d look at you and see the telltale sign. He’d say, “Hey, you pissed on your shoes. That’s disgusting. Get out of here. You’re fired.”
Jon Rappoport
The author of an explosive collection, THE MATRIX REVEALED, Jon was a candidate for a US Congressional seat in the 29th District of California. Nominated for a Pulitzer Prize, he has worked as an investigative reporter for 30 years, writing articles on politics, medicine, and health for CBS Healthwatch, LA Weekly, Spin Magazine, Stern, and other newspapers and magazines in the US and Europe. Jon has delivered lectures and seminars on global politics, health, logic, and creative power to audiences around the world. You can sign up for his free emails at www.nomorefakenews.com
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The "American Dream" is systematically being destroyed by the policymakers, the Fed etc.
The American standard-of-living is seriously being degraded...no doubt about it.
But you have every right to see the world through your rose colored glasses Zab. I read your posts looking for positive nuggets and sometimes I get them but America is in major decline.
Good post.
<<"I am truly sorry you think that this economy is as bad as you think it is. America is on track to post almost 3 % growth in the GDPfor this year, and thats after We have had 52 months of continued job growth, maybe you need to just start accepting whats happening out there. Ever since the third quarter of 2009, America's GDP has been growing, thats over 13 straight quarters of growth. Thats not smoke and mirrors, that my friend is a recovery, in simple mathematical terms that have been measured for decades.">>
INFLATION IS NOT GROWTH!!!
A real-world case in point:
I know an owner of a local restaurant that has been in business for 22 years. He just recently filed for bankruptcy. His sales have been increasing every year the last 4 years around 5 percent even though his customer counts are way way down. This is because he has been increasing his menu and drink prices every 6 months or so to cover his increased food cost (up 40% the last 4 years) and his increased liquor costs.
How is this "growth" when he is serving less food and drinks than ever (?) and less customers are in his business than ever (?) and he is now bankrupt even though his total sales are steadily up the last several years?
INFLATION IS NOT GROWTH!!!!
<<"I booked an airline ticket the other day, its for three months out, and my choices were limited, but I secured my ticket because all of the other flights were filled.">>
Can you say "declining-standard-of-living"???
The number of airline flights are way down and prices are way up. Many families that could afford to travel just 4 or 5 years ago (and I know several personally) are out of the air travel game completely because the money just isn't their anymore to afford it.
How do you explain gasoline consumption collapsing to the lowest level since the early 1980's yet prices are at all time highs for gasoline??? Yeah keep printing Bernanke this is wonderful economy you are creating.
Can you say "declining-standard-of-living" Zab??????
Guest Post: 16 Signs That The Middle Class Is Running Out Of Money
Submitted by Tyler Durden on 03/02/2013 12:08 -0500
http://www.zerohedge.com/news/2013-03-02/guest-post-16-signs-middle-class-running-out-money
Submitted by Michael Snyder of The Economic Collapse blog,
Is "discretionary income" rapidly becoming a thing of the past for most American families? Right now, there are a lot of signs that we are on the verge of a nightmarish consumer spending drought. Incomes are down, taxes are up, many large retail chains are deeply struggling because of the lack of customers, and at this point nearly a quarter of all Americans have more credit card debt than money in the bank. Considering the fact that consumer spending is such a large percentage of the U.S. economy, that is very bad news. How will we ever have a sustained economic recovery if consumers don't have much money to spend? Well, the truth is that we aren't ever going to have a sustained economic recovery. In fact, this debt-fueled bubble of false hope that we are experiencing right now is as good as things are going to get. Things are going to go downhill from here, and if you think that consumer spending is bad now, just wait until you see what happens over the next several years.
Even though the Dow is surging toward a record high right now, everyone knows that things are not good for the middle class. A recent quote from CPA Howard Dvorkin kind of summarizes our current state of affairs very nicely...
"The fact of the matter is that America is broke — whether it's mortgages, student loans or credit cards, we are broke. The old rule of thumb is that people should have six months' of savings," Dvorkin says."If you talk to people, most don't have two pennies."
These days most Americans are living from paycheck to paycheck, and thanks to rising prices and rising taxes, those paychecks are getting squeezed tighter and tighter. Many families have had to cut back on unnecessary expenses, and some families no longer have any discretionary income at all.
The following are 16 signs that the middle class is rapidly running out of money...
#1 According to one brand new survey, 24 percent of all Americans have more credit card debt than money in the bank.
#2 J.C. Penney was once an unstoppable retail powerhouse, but now J.C. Penney has just posted its lowest annual retail sales in more than 20 years...
J.C. Penney Co. (JCP) slid the most in more than three decades after the department-store chain lost $4.3 billion in sales in the first year of Chief Executive Officer Ron Johnson’s turnaround plan.
The shares fell 18 percent to $17.40 at 11:28 a.m. in New York after earlier declining 22 percent, the biggest intraday drop since at least 1980, according to data compiled by Bloomberg. J.C. Penney yesterday said its net loss in the quarter ended Feb. 2 widened to $552 million from $87 million a year earlier. The Plano, Texas-based retailer’s annual revenue slid 25 percent to $13 billion, the lowest since at least 1987.
How much worse can things get? At this point the decline has become so steep for J.C. Penney that Jim Cramer of CNBC is declaring that they are in "a true tailspin".
#3 In the United States today, a new car has become out of reach for most middle class Americans according to the 2013 Car Affordability Study...
Looking to buy a new car, truck or crossover? You may find it more difficult to stretch the household budget than you expected, according to a new study that finds median-income families in only one major U.S. city actually can afford the typical new vehicle.
The typical new vehicle is now more expensive than ever, averaging $30,500 in 2012, according to TrueCar.com data, and heading up again as makers curb the incentives that helped make their products more affordable during the recession when they were desperate for sales. According to the 2013 Car Affordability Study by Interest.com, only in Washington could the typical household swing the payments, the median income there running $86,680 a year.
#4 The founder of Subway Restaurants, Fred Deluca, says that the recent tax increases are having a noticeable impact on his business...
"The payroll tax is affecting sales. It's causing sales declines," he said, estimating a decline of about 2 percentage points off sales at his restaurants. "There are a lot of pressures on consumers," Deluca said, adding "I think this is on the permanent side, but I think business will adjust to it."
#5 Many other large restaurant chains are also struggling in this tough economic environment...
Darden Restaurants, which owns the casual dining chains Oliver Garden, LongHorn Steakhouse and Red Lobster, said blended same-store sales at its three eateries would be 4.5 percent lower during its fiscal third quarter.
Clarence Otis, Darden's chairman and chief executive, said that "while results midway through the third quarter were encouraging, there were difficult macro-economic headwinds during the last month of the quarter."
"Two of the most prominent were increased payroll taxes and rising gasoline prices, which together put meaningful pressure on the discretionary purchasing power of our guests," he added.
#6 The CFO of Family Dollar recently admitted to CNBC that this is a "challenging time" because of reduced consumer spending...
At Family Dollar where the average customer makes less than $40,000 a year, the combination of a two-percent hike in the payroll tax, rising gas prices and delayed tax refunds has created a "challenging time and an uncertain time for the consumer right now," said Mary Winston, the company's chief financial officer.
"In our case, anything that takes money out of our customer's wallet gives them less money to spend in our stores," she told CNBC. "So I think all of those things create nervousness for the consumer, and I think there are sometimes political dynamics going on that they might not even fully understand the details, but they know it's not good."
#7 Even Wal-Mart is really struggling right now. According to a recent Bloomberg article, Wal-Mart is struggling "to restock store shelves as U.S. sales slump"...
Evelin Cruz, a department manager at the Wal-Mart Supercenter in Pico Rivera, California, said Simon’s comments from the officers’ meeting were “dead on.”
“There are gaps where merchandise is missing,” Cruz said in a telephone interview. “We are not talking about a couple of empty shelves. This is throughout the store in every store. Some places look like they’re going out of business.”
This all comes on the heels of an internal Wal-Mart memo that was leaked to the press earlier this month that described February sales as a "total disaster".
#8 Electronics retailer Best Buy continues to struggle mightily. Best Buy just announced that it will be eliminating 400 jobs at its headquarters in Richfield, Minnesota.
#9 It is being projected that many of the largest retail chains in America, including Best Buy, will close down hundreds of stores during 2013. The following is a list of projected store closings for 2013 that I included in a previous article...
Best Buy
Forecast store closings: 200 to 250
Sears Holding Corp.
Forecast store closings: Kmart 175 to 225, Sears 100 to 125
J.C. Penney
Forecast store closings: 300 to 350
Office Depot
Forecast store closings: 125 to 150
Barnes & Noble
Forecast store closings: 190 to 240, per company comments
Gamestop
Forecast store closings: 500 to 600
OfficeMax
Forecast store closings: 150 to 175
RadioShack
Forecast store closings: 450 to 550
#10 Another sign that consumer spending is slowing down is the fact that less stuff is being moved around in our economy. As I have mentioned previously, freight shipment volumes have hit their lowest level in two years, and freight expenditures have gone negative for the first time since the last recession.
#11 Many young adults have no discretionary income to spend because they are absolutely drowning in student loan debt. According to the New York Federal Reserve, student loan debt nearly tripled between 2004 and 2012.
#12 The student loan delinquency rate in the United States is now at an all-time high. It is only a matter of time before the student loan debt bubble bursts.
#13 Due to a lack of jobs and high levels of debt, poverty among young adults in America is absolutely exploding. Today, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
#14 According to one recent survey, 62 percent of all middle class Americans say that they have had to reduce household spending over the past year.
#15 Median household income in the United States has fallen for four consecutive years. Overall, it has declined by more than $4000 during that time span.
#16 According to the U.S. Census Bureau, the middle class is currently taking home a smaller share of the overall income pie than has ever been recorded before.
Are you starting to get the picture?
Retailers are desperate for sales, but you can't squeeze blood out of a rock.
For much more on how the middle class is absolutely drowning in debt, please see this article: "Money Is A Form Of Social Control And Most Americans Are Debt Slaves".
But if you listen to the mainstream media, they would have you believe that happy days are here again.
Right now, everyone seems to be quite giddy about the fact that the Dow is marching toward an all-time high. And I actually do believe that the Dow will blow right past it. In fact, it is even possible that we could see the Dow hit 15,000 before everything starts falling apart.
But at some point, the financial markets will catch up with economic reality. It is just a matter of time.
In the meanwhile, those that are wise are taking advantage of these times of plenty to prepare for the great economic drought that is coming.
Don't be caught living paycheck to paycheck and totally unprepared when the next wave of the economic collapse strikes. Anyone that believes that this debt-fueled bubble of false hope can last indefinitely is just being delusional.
Bitter Pill: Why Medical Bills Are Killing Us
By Steven BrillFeb. 20, 2013
Read more: http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bills-are-killing-us/#ixzz2LsF2pu6H
I live in the Chicago, Illinois area so I assume this area is pretty much ground zero for the "American-Dream Disaster".
I'm thankful there are areas of the country that are still viable and working...where I'm stuck at it's a total disaster if you ask me. What I see with my own 2 eyes here is pretty bad.
With all the monetary printing going on and inflation they can raise the minimum wage all they want and we will still have massive poverty!
Have you seen ever the chart of the number of Amerikans on food stamps assistance??? Pretty much exponential growth in that underclass.
Your rose colored glasses are truly nauseating.
Ever see the low-end crap that is sold in Walmart??
Like I just said...
<<" Walmart is a good investment play on the growing underclass and have-not's in America...
....sigh." >>
Welcome to the wonderful new Amerika.
Walmart is a good investment play on the growing underclass and have-not's in America...
....sigh.
<<"So I am sure glad that this major US corporation is doing so well in this supposed bad economy.">>
Check out all the retail store closings in this supposedly wonderful economy. Where do you think all the lost sales at the closed stores may end up at? I'm not a fan of Walmart to say the least (DON'T EVEN GET ME STARTED)...
Just check out some of these store closing numbers for 2013. These numbers are from a recent Yahoo Finance article...
Best Buy
Forecast store closings: 200 to 250
Sears Holding Corp.
Forecast store closings: Kmart 175 to 225, Sears 100 to 125
J.C. Penney
Forecast store closings: 300 to 350
Office Depot
Forecast store closings: 125 to 150
Barnes & Noble
Forecast store closings: 190 to 240, per company comments
Gamestop
Forecast store closings: 500 to 600
OfficeMax
Forecast store closings: 150 to 175
RadioShack
Forecast store closings: 450 to 550
There is a glut of retail stores going out of business simply because most people(consumers) are flat out broke or unemployed... so demand is DOWN from the consumer.
The economy is in HORRIBLE shape and if it weren't for the insane and massive monetary inflation working it's "magic" (nee/ robbing people's standard- of-living) on the populace the GDP numbers would be horrendously contracting in this depression.
Do you believe in that baloney that inflation is good for the common man or the economy?
Can you define "the standard-of-living" for me???
Let's see you work your magic on that one?
If you were in my neighborhood I could take you on one heck of a tour of vacant commercial real estate and bankrupt businesses littering the landscape.
The world is certainly a changing.
Well by your own admission it is a bloodbath out in the "dinosaur retail stores" land.
Wonder what will become of all the vacant real estate??? I see entire shopping centers being vacated near me here in Chicago.
Nothing but a bloodbath.
CHANGE for sure anyway you want to sugarcoat it.
Retail Apocalypse: Why Are Major Retail Chains All Over America Collapsing?
By Michael, on February 17th, 2013
http://theeconomiccollapseblog.com/archives/retail-apocalypse-why-are-major-retail-chains-all-over-america-collapsing
If the economy is improving, then why are many of the largest retail chains in America closing hundreds of stores? When I was growing up, Sears, J.C. Penney, Best Buy and RadioShack were all considered to be unstoppable retail powerhouses. But now it is being projected that all of them will close hundreds of stores before the end of 2013. Even Wal-Mart is running into problems. A recent internal Wal-Mart memo that was leaked to Bloomberg described February sales as a "total disaster". So why is this happening? Why are major retail chains all over America collapsing? Is the "retail apocalypse" upon us? Well, the truth is that this is just another sign that the U.S. economy is falling apart right in front of our eyes. Incomes are declining, taxes are going up, government dependence is at an all-time high, and according to the Bureau of Labor Statistics the percentage of the U.S. labor force that is employed has been steadily falling since 2006. The top 10% of all income earners in the U.S. are still doing very well, but most U.S. consumers are either flat broke or are drowning in debt. The large disposable incomes that the big retail chains have depended upon in the past simply are not there anymore. So retail chains all over the United States are now closing up unprofitable stores. This is especially true in low income areas.
When you step back and take a look at the bigger picture, the rapid decline of some of our largest retail chains really is stunning.
It is happening already in some areas, but soon half empty malls and boarded up storefronts will litter the landscapes of cities all over America.
Just check out some of these store closing numbers for 2013. These numbers are from a recent Yahoo Finance article...
Best Buy
Forecast store closings: 200 to 250
Sears Holding Corp.
Forecast store closings: Kmart 175 to 225, Sears 100 to 125
J.C. Penney
Forecast store closings: 300 to 350
Office Depot
Forecast store closings: 125 to 150
Barnes & Noble
Forecast store closings: 190 to 240, per company comments
Gamestop
Forecast store closings: 500 to 600
OfficeMax
Forecast store closings: 150 to 175
RadioShack
Forecast store closings: 450 to 550
The RadioShack in a nearby town just closed up where I live. This is all happening so fast that it is hard to believe.
But the truth is that those store closings are not the entire story. When you dig deeper you find a lot more retailers that are in trouble.
For example, Blockbuster recently announced that this year they will be closing about 300 stores and eliminating about 3,000 jobs.
Toy manufacturer Hasbro recently announced that they will be reducing the size of their workforce by about 10 percent.
Even Wal-Mart is going through a tough stretch right now. According to documents that were leaked to Bloomberg, Wal-Mart is having an absolutely disastrous February...
Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.
“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”
So what in the world is going on here?
The mainstream media continues to proclaim that we are experiencing a robust "economic recovery", but at the same time there are a whole host of indications that things are continually getting worse.
Even global cell phone sales actually declined slightly in 2012. That was the first time that has happened since the last recession.
Perhaps it is time that we faced the truth. The middle class is shrinking, incomes are declining and there are not nearly as many jobs as there used to be.
Mort Zuckerman pointed this out in a recent article in the Wall Street Journal...
The U.S. labor market, which peaked in November 2007 when there were 139,143,000 jobs, now encompasses only 132,705,000 workers, a drop of 6.4 million jobs from the peak. The only work that has increased is part-time, and that is because it allows employers to reduce costs through a diminished benefit package or none at all.
So how can the mainstream media be talking about how "good" things are if we still have 6.4 million fewer jobs than we had back in November 2007?
And sadly, things may soon be getting a lot worse. If Congress does not do anything about the "sequester", millions of federal workers may shortly be facing some very painful furloughs according to CNN...
Federal workers could start facing furloughs as early as April, according to federal agencies trying to prepare for the worst.
Unless Congress steps in, some $85 billion in massive spending reductions will hit the federal government, doling out furloughs to much of the nation's 2.1 million federal workforce, experts say.
If you still live in an area of the country where the stores and the restaurants are booming, you should be very thankful because that is not the reality for most of the country.
I often write about the stunning economic decline of major cities such as Detroit, but there are huge sections of rural America that are in even worse shape than Detroit in many ways.
For example, many Indian reservations all over America have been shamefully neglected by the federal government and have become hotbeds for crime, drugs and poverty.
Business Insider recently profiled the Wind River Indian reservation in western Wyoming. The following is a brief excerpt from that outstanding article...
The Wind River Indian Reservation is not an easy place to get to, but I had to see it for myself.
Thirty-five-hundred square miles of prairie and mountains in western Wyoming, the reservation is home to bitter ancestral enemies: the Eastern Shoshone and Northern Arapaho tribes.
Even among reservations, it's renowned for brutal crime, widespread drug use, and legal dumping of toxic waste.
You can see some amazing photos of the Wind River Indian reservation right here.
It is hard to believe that there are places like that in America, but the truth is that conditions like that are spreading to more U.S. communities with each passing day.
We are a nation that is in an advanced state of decline. But as long as the financial markets are okay, our leaders don't seem too concerned about the suffering that everyone else is going through.
In fact, former Federal Reserve Chairman Alan Greenspan essentially admitted as much during a recent interview with CNBC. The following is how a Zero Hedge article summarized that interview...
Starting at around 1:50, Greenspan states the odds of sequester occurring are very high - in fact, the playdough-faced ex-Chair-head notes, "I find it very difficult to find a scenario in which [the sequester] doesn't happen" But when asked how this will affect the economy, Awkward Alan is unusually clearly spoken - "the issue is how does it affect the stock market."
While not so many of our leaders have taken the path to direct truthiness, Greenspan somewhat shocks a Botox'd and babbling Bartiromo when he admits "the stock market is the key player in the game of economic growth."
Bartiromo shifts uncomfortably in her seat, strokes her imaginary beard and stares blankly as Greenspan explains that while the sequester will have a real effect on the real economy, "if the stock market can hold up through this, then the effect will be rather minor."
Do you see?
As long as the stock market is moving higher they think that everything is just fine and dandy.
And the Obama administration?
They continue to pursue the same policies that got us into this mess.
Their idea of "economic reform" is to threaten to sue businesses that do not hire ex-convicts.
And of course now that Obama has been re-elected he is putting a tremendous amount of effort into "stimulating the economy".
For example, he spent this weekend golfing in Florida, and the Obamas recently spent about 20 million taxpayer dollars vacationing in Hawaii.
Meanwhile, the U.S. economy is getting worse with each passing day.
If you doubt that economic conditions are getting worse, please read this article: "Show This To Anyone That Believes That 'Things Are Getting Better' In America".
When you look at the cold, hard numbers, it is undeniable what is happening to America.
And our leaders are not doing anything to fix our problems. In fact, most of the time they are just making things worse.
So buckle up and get prepared. We are in for very bumpy ride, and this is only just the beginning.
QE cannot end....
http://www.siliconinvestor.com/readmsg.aspx?msgid=28642945
From: heinz44 1/4/2013 9:41:21 AM
of 107681
Keep in mind that "QE to Infinity" has nothing to do with Main Street. It has to do with the lingering real balance sheet problem camouflaged by FASB permission for financial companies as a product of their ability to value their OTC derivatives at whatever price pleases them. If QE comes to an end it will further impact the lending ability and willingness to lend by major institutions. You CANNOT show up on the doorstep again with QE and expect that all factors will move in a desired direction. There is no other tool out there to handle the unique economic problems of today (buy time) other than QE.
Therefore:
It will be interesting to see if the PPT (plunge protection team) can hold general equities up via their immense spreads.
Now negative economic news becomes more positive for gold as it makes, in the mind of the market, more difficult to take a hawkish stand at the Federal Reserve, which the cessation of QE would certainly be. On the other side, good economic news would have the opposite impact.
I cannot at present conceive of a better answer now to you inquiry than to again post what I explain correctly as the reality of the subject of QE, so important to understand.
The Federal Reserve Has No Practical Option To End QE
Dear CIGAs,
Such an announcement has been part of QE either from MSM or some Fed board member since it began. The implication of stopping QE is so dire to the economy that it is in a practical sense impossible. When gold was being sold by central banks during the 1970s market announcements were made constantly with the bias to depress metals.
There is no way that the implications and consequences of what has been done up to now can be talked or manipulated away. There is no practical way that QE can cease here or in Euroland without a total and final collapse of the financial system. Just go back to the IMF report on OTC derivatives I posted this morning. If QE ceases, the US bond market collapses and the Fed must debt monetize all required debt, which means if QE stops, it starts up again immediately and in a crisis mode.
I have to admit that if you have been a reader here for any length of time you should know this without asking me. The pressure that people unload on me during any gold reaction is downright mean.
The statement that QE can stop is simply MOPE. QE cannot stop or the world ends as you know it.
Please print this out and post it on your computer because every time the long cycle guy repeats his year old bear gold price prediction or the Fed says anything about stopping QE, you all go wild. It is embarrassing really.
If you do not understand what you are in, why are you in it?
Truman said it all when he said if you can’t stand the heat, get out of the kitchen.
The Federal Reserve has no practical option to end QE without ending the economic world for decades to come. Should that actually occur in some parallel universe, only gold will protect those citizens from the collapse of the by-default reserve currency. I am sure i have written this at least 200 times.
Respectfully,
Jim
Thank you Ron Paul for telling it like it is:
http://www.zerohedge.com/news/2012-12-29/ron-paul-fiscal-cliff-we-have-passed-point-no-return
In a little under three minutes, Ron Paul explains to a somewhat nonplussed CNBC anchor just how ridiculous the charade that is occurring in D.C. actually is. This succinct spin-free clip should be required viewing for each and every asset-manager, talking-head, propagandist, and mom-and-pop who are viewing the last-minute idiocy of the 'fiscal cliff' debacle with some hope that things will be different this time. "We have passed the point of no return where we can actually get our house back in order," Paul begins, adding that "they pretend they are fighting up there, but they really aren't. They are arguing over power, spin, who looks good, who looks bad; all trying to preserve the system where they can spend what they want, take care of their friends and print money when they need it." With social safety nets available to rich and poor, there is no impetus for change and "the country loses," but Paul concludes, the markets are starting to say "there is a limit to this."
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Thomas Jefferson
Housing Up, Home Ownership Down
The Mysterious New Housing Bubble
by MIKE WHITNEY
DECEMBER 18, 2012
The rebound in housing is now in full swing. Housing starts are up, existing home sales are gaining pace, inventory is down, and prices are on the rise. According to a recent report by Corelogic “House prices are up 6.3% year-over-year in October, the largest increase since 2006 and the eighth consecutive increase in home prices nationally on a year-over-year basis.” Many experts are now predicting that 2013 will be even better, in fact, J.P. Morgan thinks that prices could gain another 10 percent in the next 12 months. Here’s the story from the Wall Street Journal:
“J.P. Morgan Chase Co. expects U.S. home prices to rise 3.4% in its base-case estimate and up to 9.7% in its most bullish scenario of economic growth. Standard and Poor’s, which rates private-issue mortgage bonds, on Friday said it expects a 5% rise in 2013.” (“Home Prices Could Jump 9.7% in 2013, J.P. Morgan Says”, Wall Street Journal)
And the housing boom is having an impact on Wall Street, too, where prescient investors who loaded up on mortgage-backed securities (MBS) are cashing in bigtime via the Fed’s new MBS-buying program dubbed QE3. Fed chairman Ben Bernanke is paying top-dollar for financial derivatives that, in real terms, are probably worth just pennies on the dollar.
Despite the increasingly positive signs of market strength, there are reasons to be skeptical, after all, this is the second time that prices and sales rallied since the bottom fell out in 2006. The first rebound took place in 2009, when President Barack Obama initiated his Firsttime Homebuyer program which provided lavish incentives for potential buyers to sign on the bottom line. The program sparked a frenzy of activity that reversed the direction of the market, but quickly petered out in a matter of months. Could today’s sudden surge in prices be another “false start” or is it the real deal? Only time will tell. But it’s worth noting that the market has never really cleared and that normal supply-demand dynamics have never been allowed to work as one would expect in a free market. In fact, housing is arguably the most maligned and manipulated market of all time. Mortgage rates are artificially low due to Fed intervention (QE3). Inventory is artificially low due to the banks withholding of distressed backlog. Down payments are so minuscule (FHA=3.5%) that homebuyers end up leveraged at a 30 to 1 ratio, the same as the big Wall Street investment banks prior to the Crash of ’08. And, finally, government-backed mortgage modifications (HAMP) provide generous refinancing to high-risk “underwater” applicants with LTV at 125%, a process that makes subprime mortgages look like a model of prudent lending. So much is fake about today’s housing market, that it’s a stretch to call it a market at all.
Even so, there are anomalies in the data that don’t support the media’s storyline that “Housing Is Back”. For example, did you know that the homeownership rate is still falling?
But how can that be, you ask? After all, if housing is recovering, then more people must be moving into homes, right?
Wrong. Check out this illuminating post from Sober Look:
“Some readers have been asking how one can reconcile positive signs in the housing market with declining rates of homeownership. Indeed, homeownership is falling at an even faster pace than during the 08-10 period….The explanation is that so far a great deal of net demand growth in housing has been in rental units. …This demand for rentals is in fact one of the factors supporting the housing market – for every renter there is a landlord who buys a home.
JPMorgan: – There is no contradiction between increased demand for housing and reduced homeownership rates. Demand for housing is mainly dependent on the increase in the number of households, whether these households choose to own or to rent the housing units they live in. Growth of household formation had been stifled during the expansion to date by high unemployment and subdued job growth.
….
The decline in homeownership rates implies that virtually all the increase in demand for housing units associated with increased household formation consists of increased demand for rental units. Indeed current estimates indicate that over the past year the number of occupied rental units increased 1.32 million and the number of owneroccupied housing units actually declined 175,000.” (“Falling homeownership rate and the housing market”, Sober Look)
Well, that changes things a bit, doesn’t it? So if the number of people who actually bought a home and moved in dropped by 175,000, then what we’re seeing is industrial-scale investment by Wall Street speculators who are getting lavish financing perks from the banks to buy distressed properties that, if they had been sold on the MLS or via bank auctions, would have driven prices down even further pushing bank balance sheets deeper into the red. In other words, the Obama administration, the banks, the Fed and the behemoth private equity firms are all in bed together to prevent firsttime homebuyers from getting a good deal on a foreclosure and to reward the people who blew up the financial system with another backdoor bailout.
Does that change your attitude about the so called housing rebound at all?
But there is an upside to all this speculative investment, that is, at least the banks are whittling down their gigantic stockpile of backlogged homes. That’s got to be a good thing, right?
Wrong, again. Because the people who are getting pushed out of the market, are the very people the who historically provide continuity and stability, that is, firsttime homebuyers. Here’s the scoop from CNBC:
“Current homeowners are finally moving up, and distressed sales are making up less of the overall market—all signs of much-needed improvement in housing….Unfortunately, first-time home buyers are seeing just the opposite, largely left out of this surge in sales and prices. Their share of the market, usually up in the 40 percent range historically, fell to 34.7 percent in October, the lowest in the Campbell/IMF survey’s three-year history.” (“Housing Recovery Is Leaving Behind First-Time Buyers”, CNBC)
So, more of the low-end homes are being bought up by the big private equity firms, which means fewer crumbs for the little guy at the bottom. Is that really a positive development?
And, how about this: You probably read that existing home sales have been picking up, which is true. In October, sales on existing homes rose 2.1 percent to a seasonally adjusted annual rate of 4.79 million. But there’s more to this story than meets the eye. Check this out at CNBC:
“The October numbers were driven entirely by multifamily apartment starts, up 10 percent month-to-month and up 63 percent year over year…..Younger Americans are in fact moving out of their parents’ basements, but many are moving into rental units, and that is also a formed household.” (“Yes, Housing Starts Surge, but Rentals Are the Drivers”, CNBC)
So this is the great housing recovery that everyone’s been crowing about; little Johnny and Janie finally leave the nest to live in a rental unit owned by some fatcat PE pirate from Manhattan? That doesn’t exactly sound like the America Dream, now does it? And here’s something else to mull over (from the same article):
“Housing starts at 894,000 is near where they were at the depths of the 1981 and 1991 recessions and 60 percent below the peak in January 2006,” pointed out Peter Boockvar at Miller Tabak.”
So let’s keep things in perspective. Housing is still in the doldrums despite the hype, despite the low rates, despite the unprecedented meddling and intervention by the Fed, the banks and the USG. Just look at the data. Naturally, if the banks withhold distressed inventory, the government lends money to underwater homeowners, and the Fed slashes rates to record lows and buys whatever MBS the banks produce, then there’s going to be a surge in activity. But how long will it last?
No one knows. But one thing is certain, the Fed’s loosy goosy policies never seem to work as planned. Case in point: Bernanke’s zero rates and QE4 have not revived interest in housing as much as they have touched off a surge of speculation which could generate another destabilizing asset-price bubble. Get a load of this from the SF Gate:
“There is a tsunami of money coming into the market, billions of dollars to buy distressed single-family homes,” said Jeff Lerman, a San Rafael real estate lawyer, speaking about the national landscape. “The window of opportunity is rapidly closing (as prices rise). Over the next 18 months, profit margins in single-family opportunistic buying will be compressed quite a bit.”
…
A Chronicle analysis of sales data compiled by San Diego research firm DataQuick showed that absentee buyers, who once bought about 10 percent of homes sold in the nine Bay Area counties, account for about a quarter of all purchases this year, more than doubling their share…..
“Right now the dominating force driving the rental market in California is foreclosed-upon former homeowners transitioning to renters,” Burke said. “That demographic is an important market segment for us.” (“Investors rushing into real estate deals”, SF Gate)
Repeat: “A tsunami of money coming into the market” from deep-pocket speculators. That’s your “recovery” in a nutshell.
Of course the article focuses on the Bay Area, but the same thing is going on in the hotter markets across the country, particularly Los Vegas, Phoenix, Atlanta and Miami. Investors are buying up all the cheap homes they can get their hands on . The flurry of activity has pushed prices higher, but can it last? Housing expert Mark Hanson doesn’t think so. Here’s a clip from a recent post at The Big Picture:
“For years I have proclaimed that “no housing recovery will ever occur — or no dead-cat-bounce will reach “escape velocity” or become “durable” — unless the repeat buyer is leading the way. This is because investors and first-timers are thin, volatile cohorts who have been known over history to leave the market literally, overnight….
The problem is that the mortgaged homeowner has always been the primary demand cohort. It’s not investors, first-timers or those who own their homes free and clear. Rather, the mortgage-levered homeowner who tends to move every 6 to 8 years who provides most of the historic underlying support for macro housing.
This is a problem. Put simply, there are more houses today then there were five years ago but a full HALF of the primary demand cohort — repeat buyers — died due to negative equity….. and able buyers have been cut in half.
Bottom line, WHERE IS THE “DURABLE”, INCREMENTAL DEMAND GOING TO COME FROM(?) (“Shadow” & “Ghost” Inventory / Negative & “Effective” Negative Equity…The Real Challenges for US Housing”, Mark Hanson, The Big Picture)
Hanson makes a good point. Traditionally, repeat “move up” buyers have driven the market, but that’s not happening now because so many people are underwater and can’t afford to move. So, yes, housing prices can go higher for a while, but the higher they go, the less profit investors will make, which will lead to a drop-off in sales and greater price erosion. That will put us back at Square 1.
So, what’s going to happen next?
That’s easy. The banks are going to try to reduce their stockpile of unwanted homes by increasing the number of foreclosures. The supply of distressed homes actually increased while the banks fiddled inventory to effect the fake rebound. ( No, the banks are not running out of distressed inventory as the dissembling media would have you believe.) So now the banks have to dump more homes on the market which will put pressure on prices. The banks don’t want prices to jump 6.5% per year. They want just enough upward movement in prices to lure people back into the market. This process is already underway, as this CNBC article reveals:
“The good news is that overall foreclosure activity continues to fall and a decline in new foreclosures are leading the drop. The bad news is that the huge backlog of homes already in the foreclosures process, but long delayed, are finally going back to the banks in big numbers.
Bank repossessions jumped 11% in November month-to-month and rose 5% from November of 2011, according to RealtyTrac. That marks the first annual jump in just over two years.” (“Housing’s Repo Man Is Back”, CNBC)
So tell me this, dear reader: Why did “bank repossessions (suddenly) jump 11% in November”? And why has foreclosure activity picked up for the first time “in over two years”?
Is it because the banks didn’t know that they were sitting on millions of distressed properties that they’d eventually have to sell or is it because the banks colluded with the Fed and Obama to control the flow of foreclosures in order to prop up prices and seduce more suckers back into the market?
That’s a no-brainer, right? It’s all manipulation.
So, how is this all going to play-out?
Well, we know that the Fed is going to continue to purchase mortgage-backed securities (MBS) to the tune of $45 billion per month “indefinitely”. But housing sales could still weaken as profit margins on investment properties shrink and more of the big players look for other places to put their money. That gives Bernanke about a 6-month window to settle on a strategy for inflating another housing bubble. He knows he cannot count on organic demand or move up buyers because unemployment is still too high and wages are not showing any sign of growth. So, his only hope is to change regulations so the banks can resume lending to mortgage applicants who’ll never be able to repay the debt. And that is precisely what the Fed chair is doing. Take a look at this in Bloomberg:
“Federal Reserve Chairman Ben S. Bernanke said the Fed will take action to speed growth and a rebound in a housing market facing obstacles ranging from too-tight lending rules to racial discrimination….Bernanke said while tighter credit standards after a collapse in the subprime mortgage market were appropriate, “it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.”…
Bernanke said housing-finance authorities have taken steps to “remove barriers to the flow of mortgage credit” and referred to efforts by the Federal Housing Finance Agency and by Fannie Mae and Freddie Mac to clarify rules surrounding mortgages that go into default.
These steps, the 58-year-old Fed chief said, should “increase the willingness of lenders to make new loans.” (“Bernanke Says Fed Will Do What It Can to Support Housing”, Bloomberg)
Did you catch that part about how “the Fed will take action (on) racial discrimination”?
In other words, African Americans are going to be in the crosshairs again like they were during the subprime fiasco. Take a look at this in Bloomberg:
“Lenders were 3½ times more likely to steer blacks to high-interest mortgages than whites with comparable credit scores, according to a Center for Responsible Lending study of 27 million loans originated from 2004 to 2008. In Memphis, where 63 percent of the 652,000 residents are black, officials say their city was targeted for such predatory lending — a practice that Marano says his company didn’t engage in….”(“Wall Street Kept Winning on Mortgages Upending Homeowners”, Bloomberg)
Does Bernanke really care if minorities get fleeced for a second time in less than a decade?
Don’t make me laugh. The Fed doesn’t give a rat’s ass who gets taken to the cleaners as long as his crooked Wall Street buddies get their pound of flesh.
So, here’s how it’s going to go down: Bernanke’s going to twist arms at the Consumer Financial Protection Bureau (CFPB) to define a “qualified mortgage” in a way that allows the banks to dump their garbage loans on Uncle Sam without any risk to themselves. Once the new regulations are in place and the banks get the “safe harbor” provision they want; they’ll start issuing mortgages to anyone who’s strong enough to sit upright and put a “X” on the dotted line, which is how we got into this mess to begin with.
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.
The Derivatives Tsunami and the Dollar Bubble
The Fiscal Cliff is a Diversion
DECEMBER 18, 2012
by PAUL CRAIG ROBERTS
The “fiscal cliff” is another hoax designed to shift the attention of policymakers, the media, and the attentive public, if any, from huge problems to small ones.
The fiscal cliff is automatic spending cuts and tax increases in order to reduce the deficit by an insignificant amount over ten years if Congress takes no action itself to cut spending and to raise taxes. In other words, the “fiscal cliff” is going to happen either way.
The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy. Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.
Regardless, the fiscal cliff is about small numbers compared to the Derivatives Tsunami or to bond market and dollar market bubbles.
The fiscal cliff requires that the federal government cut spending by $1.3 trillion over ten years. The Guardian reports that means the federal deficit has to be reduced about $109 billion per year or 3 percent of the current budget. More simply, just divide $1.3 trillion by ten and it comes to $130 billion per year. This can be done by simply taking a three month vacation each year from Washington’s wars.
The Derivatives Tsunami and the bond and dollar bubbles are of a different magnitude.
Last June 5 I pointed out that according to the Office of the Comptroller of the Currency’s fourth quarter report for 2011, about 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JP Morgan Chase Bank, Bank of America, Citibank, and Goldman Sachs.
Prior to financial deregulation, essentially the repeal of the Glass-Steagall Act and the non-regulation of derivatives–a joint achievement of the Clinton administration and the Republican Party–Chase, Bank of America, and Citibank were commercial banks that took depositors’ deposits and made loans to businesses and consumers and purchased Treasury bonds with any extra reserves.
With the repeal of Glass-Steagall these honest commercial banks became gambling casinos, like the investment bank, Goldman Sachs, betting not only their own money but also depositors money on uncovered bets on interest rates, currency exchange rates, mortgages, and prices of commodities and equities.
These bets soon exceeded many times not only US GDP but world GDP. Indeed, the gambling bets of JP Morgan Chase Bank alone are equal to world Gross Domestic Product.
According to the first quarter 2012 report from the Comptroller of the Currency, total derivative exposure of US banks has fallen insignificantly from the previous quarter to $227 trillion. The exposure of the 4 US banks accounts for almost of all of the exposure and is many multiples of their assets or of their risk capital.
The Derivatives Tsunami is the result of the handful of fools and corrupt public officials who deregulated the US financial system. Today merely four US banks have derivative exposure equal to 3.3 times world Gross Domestic Product. When I was a US Treasury official, such a possibility would have been considered beyond science fiction.
Hopefully, much of the derivative exposure somehow nets out so that the net exposure, while still larger than many countries’ GDPs, is not in the hundreds of trillions of dollars. Still, the situation is so worrying to the Federal Reserve that after announcing a third round of quantitative easing, that is, printing money to buy bonds–both US Treasuries and the banks’ bad assets–the Fed has just announced that it is doubling its QE 3 purchases.
In other words, the entire economic policy of the United States is dedicated to saving four banks that are too large to fail. The banks are too large to fail only because deregulation permitted financial concentration, as if the Anti-Trust Act did not exist.
The purpose of QE is to keep the prices of debt, which supports the banks’ bets, high. The Federal Reserve claims that the purpose of its massive monetization of debt is to help the economy with low interest rates and increased home sales. But the Fed’s policy is hurting the economy by depriving savers, especially the retired, of interest income, forcing them to draw down their savings. Real interest rates paid on CDs, money market funds, and bonds are lower than the rate of inflation.
Moreover, the money that the Fed is creating in order to bail out the four banks is making holders of dollars, both at home and abroad, nervous. If investors desert the dollar and its exchange value falls, the price of the financial instruments that the Fed’s purchases are supporting will also fall, and interest rates will rise. The only way the Fed could support the dollar would be to raise interest rates. In that event, bond holders would be wiped out, and the interest charges on the government’s debt would explode.
With such a catastrophe following the previous stock and real estate collapses, the remains of people’s wealth would be wiped out. Investors have been deserting equities for “safe” US Treasuries. This is why the Fed can keep bond prices so high that the real interest rate is negative.
The hyped threat of the fiscal cliff is immaterial compared to the threat of the derivatives overhang and the threat to the US dollar and bond market of the Federal Reserve’s commitment to save four US banks.
Once again, the media and its master, the US government, hide the real issues behind a fake one. The fiscal cliff has become the way for the Republicans to save the country from bankruptcy by destroying the social safety net put in place during the 1930s, supplemented by Lyndon Johnson’s “Great Society” in the mid-1960s.
Now that there are no jobs, now that real family incomes have been stagnant or declining for decades, and now that wealth and income have been concentrated in few hands is the time, Republicans say, to destroy the social safety net so that we don’t fall over the fiscal cliff.
In human history, such a policy usually produces revolt and revolution, which is what the US so desperately needs.
Perhaps our stupid and corrupt policymakers are doing us a favor after all.
Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. His latest book, Wirtschaft am Abgrund (Economies In Collapse) has just been published.
55 Reasons Why California Is The Worst State In America
Michael Snyder
Economic Collapse
Dec 13, 2012
Why in the world would anyone want to live in the state of California at this point? The entire state is rapidly becoming a bright, shining example of everything that is wrong with America. It is so sad to watch our most populated state implode right in front of our eyes. Like millions of Americans, I was quite enamored with the state of California when I was younger. The warm weather, the beaches, the great natural beauty of the state and the mystique of Hollywood all really appealed to me. At one point I even thought that I wanted to move there. But today, hordes of Californians are racing to get out of the state because it has become a total nightmare. It is the worst state in the country in which to do business, taxes were just raised even higher, unemployment is more than 20 percent higher than the national average and the state government is drowning in debt. Meanwhile, poverty, gang activity and crime just seem to get worse with each passing year. On top of everything else, the insane politicians in Sacramento just keep on passing more laws that make the problems that the state is facing even worse. Unfortunately, what is happening in California may be a preview of what is coming to the entire nation. The old adage, “as California goes, so goes the nation”, has been proven to be true way too many times.
In dozens of different ways, the state of California is showing the rest of us what not to do. Will we learn from their mistakes, or will we follow them into oblivion? Please share the list below with as many people as you can. In addition to a large amount of new research, this list also pulled heavily from one of my previous articles and from outstanding research done by Richard Rider. The following are 55 reasons why California is the worst state in America…
http://www.infowars.com/55-reasons-why-california-is-the-worst-state-in-america/
Look's like a good show tonight on Coast To Coast Am radio for the night owls...
http://www.coasttocoastam.com/
http://www.coasttocoastam.com/stations
tonight's show
1am - 5am ET
10pm - 2am PT
Fiscal Cliff
Mon 12-10
Investment advisor Catherine Austin Fitts discusses how the hype over the current 'fiscal cliff' is nothing but a smokescreen to cover trillions of dollars in missing funds and wide-spread fraud. Related Links: Missing Money/ Article on Dillon, Read, & Co.
<<"Probably a good chunk of it in a home to live in, filled with a bunch of nice things, filled with joy, happiness and love, had to get that one in. Not everything is always measured in dollar and cents.">>
Well said!
Thank you very much. I will check that out.
Gundlach Expecting Kaboom Of Defaults, Pours Into Chinese Stocks
NOVEMBER 30, 2012
http://www.fa-mag.com/news/gundlach-expecting-kaboom-of-defaults-pours-into-chinese-stocks-12707.html?section=43
(Bloomberg News) It's mid-October, and Jeffrey Gundlach is giving a stump speech to a luncheon crowd of about 200 financial advisers and investors at Los Angeles’s City Club. The renowned money manager's theme: the financial catastrophe on the horizon.
The co-founder and chief executive officer of DoubleLine Capital LP explains that the first phase of the coming debacle consisted of a 27-year buildup of corporate, personal and sovereign debt. That lasted until 2008, when unfettered lending finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth, Bloomberg Markets reports in its January issue.
In the ominous third phase, he predicts another crisis: Deeply indebted countries and companies, which Gundlach doesn’t name, will default sometime after 2013. Central banks may forestall these defaults by pumping even more money into the economy -- at the risk of higher inflation in coming years.
Gundlach, 53, doesn’t know when the third phase will get here, but he tells his audience they need to gradually get ready for it.
“I don’t believe you’re going to get some sort of an early warning,” Gundlach, who’s also chief investment officer at Los Angeles-based DoubleLine, tells his listeners. “You should be moving now.”
Gemstones, Art
He recommends buying hard assets: Gemstones, art and commercial real estate are high on his list. And DoubleLine has been buying the stocks of Chinese companies, U.S. natural gas producers and gold-mining firms because it considers them to be bargains.
Gundlach himself has amassed a contemporary art collection of about 100 pieces, with works by Jasper Johns and Franz Kline. The money manager drew on abstract painter Piet Mondrian’s double-line style for the name of his firm and its geometrical, crosshatched logo.
Gundlach, who correctly predicted the subprime mortgage disaster, has a proven record as a prognosticator -- and the performance numbers to go with it. At his former firm, TCW Group Inc., his Total Return Bond Fund earned an annual average of 7.9 percent in the decade ended in November 2009, according to data compiled by Bloomberg.
His flagship $35.8 billion DoubleLine Total Return Bond Fund gained an annual average of 13.2 percent from its inception in April 2010 through Nov. 28, topping the performance of Gundlach’s more famous neighbor to the south, Bill Gross.
Topping Gross
The co-chief investment officer at Newport Beach, California-based Pacific Investment Management Co. earned an average of 7.6 percent during the same period in his much larger, $281 billion Pimco Total Return Fund.
Gundlach’s performance convinced Andreas Lehmann, chairman of Luxembourg-based Alma Capital Investment Funds, to hire him to manage a fund for European investors. “Ultimately, what matters are the returns over time, and on that count, Jeffrey stands out,” Lehmann says.
If Gundlach’s outlook for the possibility of higher inflation comes true, his bond funds could suffer like most fixed-income investments. Since he opened DoubleLine in December 2009, it had gathered about $50 billion in assets as of mid- November, and it was the fastest-growing mutual fund firm ever in its first year, according to Strategic Insight, a New York- based research firm.
Mortgage Holdings
Most of DoubleLine’s assets are in the Total Return Bond Fund, which has 78 percent of its holdings in residential mortgage-backed securities -- both those guaranteed by the U.S. government and those that are not and have discounted prices.
The mix should help the fund weather either inflation or deflation because the securities should move in opposite directions if interest rates go up or down. Because higher rates could mean the economy is improving and housing prices are recovering, there would be fewer defaults on the riskier nonguaranteed bonds, and prices would rise, says Philip Barach, DoubleLine’s co-founder and president.
And he says the fund’s duration, a measure of how much bond prices will change when yields rise or fall, is low, making it less sensitive to shifts in interest rates.
“Jeffrey and I are more risk averse than you might imagine,” Barach says.
Gundlach is so confident that phase three is coming that he’s planning to start an equities fund and a long-short hedge fund in early 2013 to offer investors additional protection from inflation. Gundlach, who says he buys assets only on the cheap, is also sitting on cash in anticipation of scooping up securities at fire-sale prices. Cash makes up 17 percent of his Total Return fund.
Kaboom
He says the amount of money investors can make in phase three will dwarf what they can earn now.
“I’m waiting for something to go kaboom,” Gundlach says in his office a week before the L.A. speech. “If phase three takes two years, it’s worth waiting for. The markets don’t have lots of opportunity now.”
Gundlach has a history of making brash pronouncements. At a conference in New York in April, he told a Bloomberg News reporter that he would abolish the 99-year-old Federal Reserve, a position espoused by failed Republican presidential aspirant Ron Paul.
“That’s a very extreme view,” says Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Given how the Fed has evolved since the early 1900s, to say we’re going to change all that and start over is absurd.”
Rock Drummer
Gundlach has a propensity to stand up for his ideas even at the risk of jeopardizing his career. He dropped out of a Yale University theoretical math Ph.D. program because he was told his idea for a thesis proving infinity didn’t exist was out of the mainstream of the department. He then moved to Los Angeles and performed as a drummer in two rock bands before landing a job as a quantitative analyst in 1985 at TCW.
Gundlach soon became a star manager of mortgage-backed-securities funds and, in 2009, was on the losing side of an internal struggle over the leadership of the Los Angeles firm. TCW fired Gundlach and sued him a month later, accusing him of breach of fiduciary duty and theft of trade secrets.
Gundlach shot back with a countercomplaint, accusing TCW of ousting him to keep up to $1.25 billion in future fees that his team would have been paid. The suits were settled, though Gundlach hasn’t left behind his combative ways. Since 2010, he’s been complaining to Morningstar Inc., claiming the research firm’s analysts are biased against him.
No Noodge
“Jeffrey didn’t gather $50 billion in assets in three years because he’s some little noodge in the corner with his eyeshades on,” says Tania Modic, a DoubleLine investor at Western Investments Capital LLC in Incline Village, Nevada. “Jeffrey wants to be an outstanding thought leader, and you’re not going to get it by just being a bland personality.”
Gundlach also isn’t shy about touting his own exploits and expertise.
On art: “I seriously doubt there’s anyone who knows more than me about Mondrian.”
On the New York Times Saturday crossword puzzle, the hardest one of the week: He completes them in pen and often skips Sunday because it’s too easy, like counting Cheerios in a box. “You can do it, but what’s the point?”
On his Total Return Bond Fund, which attracted the most deposits of all U.S. mutual funds in 2012 through Oct. 31, according to Morningstar: “I have the most popular fund in the world.”
J. Alfred Prufrock
Those who work for Gundlach are intensely loyal to him. As he was starting DoubleLine in December 2009, more than 40 people from TCW -- including Barach, his right-hand man -- joined him at the new firm. Bonnie Baha, who followed Gundlach from TCW and now oversees DoubleLine’s investments in corporate bonds, says her boss’s eclectic mind is part of his charm.
One time, Baha cited a line from T.S. Eliot’s “The Love Song of J. Alfred Prufrock” during a meeting, and Gundlach began reciting the first stanza of the poem from memory. He peppers his unscripted investor presentations with references to James Bond movies, William Shakespeare, Karl Marx and rock songs from Nirvana and The Who.
And in addition to rooting for his hometown Buffalo Bills football team, he likes to garden, pruning back his Betty Boop and Gemini tea roses.
“He’s a much more complex human being than an egotistical blowhard,” Baha, 53, says. “The guy is a paradox. He is crazy about football. Then he recites a T.S. Eliot poem.”
Subprime Warning
As an investor, Gundlach goes on buying sprees when asset values plunge. After warning investors at a 2007 Morningstar conference that the subprime lending market was a “total unmitigated disaster,” he started to load up about a year later on the distressed mortgage-backed securities that most of the world was shunning.
The winning bet produced a return of 21.7 percent in the Total Return Bond Fund in 2009 through Dec. 4, when he was booted from TCW.
Now, after a global financial debacle, bank bailouts, the European debt crisis, a slowdown in China and a halting U.S. recovery, Gundlach is preparing for another bout of bad news -- his so-called third phase. While he doesn’t expect any countries to default in 2013, he points to Japan as an example of a government that may have to embark on more-aggressive asset buying that could lower the value of its currency.
Its economy contracted at an annualized rate of 3.5 percent in the third quarter. Japan’s trade deficit rose to a half-year record 3.22 trillion yen ($40.5 billion) in the six months ended on Sept. 30. And the central bank increased its asset purchase program on Oct. 30 to 66 trillion yen to overcome deflation.
European Events
“Japan is running out of policy tools,” he says.
Following actions by the European Central Bank that pumped $355.4 billion into the region starting in 2010, DoubleLine managers see several possible events that could hammer markets, from Finland exiting the euro zone to another near default of a Spanish bank.
“The only reason asset prices are up is because of all the liquidity in the system,” says Luz Padilla, manager of the $707 million DoubleLine Emerging Markets Fixed Income Fund. “Our concern is that it can turn very quickly.”
In the U.S., Gundlach sees a postelection, pre-fiscal cliff economy that’s growing anemically and only because of consumer loans, government stimulus and the Fed. He says inflation could jump by 2 percentage points if the Fed ramps up its purchases of government debt beyond what it has done so far.
Pressure Cooker
Led by Chairman Ben S. Bernanke, the Fed has purchased $2.3 trillion in securities in two rounds of quantitative easing since 2008. And it may extend its third round through 2013 and climb past a total of $1 trillion in purchases, according to economists interviewed by Bloomberg.
“You’re just going to build up pressure in the pressure cooker, and when it blows, the lid will blow sky-high, and that’s when you get to phase three,” Gundlach says.
His pessimism sets him apart from other prominent money managers, notably Larry Fink, chairman of BlackRock Inc. Fink says the U.S. banking system is in relatively good shape and the large supply of natural gas in the U.S. will create jobs. The economy grew at a stronger-than-forecast annual pace of 2 percent in the third quarter.
“In the long run, I’m very bullish on the United States,” Fink, 60, said at a BlackRock iShares conference in November.
Fiscal Cliff
Gundlach says he has no faith that President Barack Obama in his second term will reach an accord with Congress to make significant cuts in the $1.09 trillion deficit. He says the tax hikes proposed by Obama on the wealthy wouldn’t bring in enough revenue to have a significant impact and politicians probably won’t make major cuts in entitlement programs because the public overwhelmingly supports them.
Gundlach dismisses the chances of a grand compromise on the so-called fiscal cliff of automatic spending cuts and tax increases totaling $607 billion if an agreement isn’t reached by January. Rather, he expects politicians will find a way to push the deficit issues into 2013 and beyond.
“I don’t think Obama is likely to give on anything, and I doubt the Republicans are going to roll over because they failed to regain the White House,” Gundlach says.
In making his case to abolish the Fed, Gundlach cites an argument made by former Texas Representative Ron Paul in 2002. Paul said the U.S. Constitution grants Congress the authority to coin money and regulate the value of currency and that it doesn’t give Congress the right to delegate control over monetary policy to a central bank.
Emerging Markets
Richard Pildes, a constitutional law professor at the New York University School of Law, says that line of thinking has been widely discredited. “The constitutionality of Congress creating independent agencies like the Fed has been long settled,” he says.
Gundlach’s outlook isn’t uniformly bleak. He sees some opportunities in emerging-markets equities, particularly in China, where the Shanghai Stock Exchange Composite Index fell 3.5 percent in the first 10 months of 2012.
Chinese stocks make up the majority of international equity holdings in the DoubleLine Multi-Asset Growth Fund, says Jeffrey Sherman, a portfolio manager for the fund. It increased its exposure to international equities to 6.7 percent as of Oct. 31 from 4.9 percent a month earlier.
Beyond China, Gundlach says, the demographics in some emerging markets will support sustained growth. While developed nations will have fewer than three workers for every retiree by 2025, Brazil, India and Mexico will have almost six to seven workers, according to the U.S. Census Bureau.
Expensive Equities
“Retirees take resources from a society, and workers produce resources,” he says.
In line with Gundlach’s gloomy outlook for America, the Multi-Asset fund recently dumped some of its U.S. equities. Sherman says the stocks are too expensive and U.S. companies don’t have much potential for growth. But the fund has added to its holdings of gold-mining companies and natural gas producers in 2012 because these stocks are cheap, he says.
Gundlach has made some prescient calls on stocks. He recommended in April that investors short Apple Inc. and hedge that bet by going long on natural gas. He said Apple was priced too high at $606 after the stock had risen more than sevenfold from January 2009 to April 2012. After that call, Apple stock fell about 4.7 percent through Nov. 29.
Even after the September release of the iPhone 5, which shattered Apple’s pre-sale order records, the company will struggle to reach its earnings potential without an innovator like Steve Jobs at the helm, he says.
Natural Gas
Gundlach made his recommendation on natural gas stocks after they fell 59 percent from January 2009 to April 2012. The prices plunged as producers extracted gas trapped in shale and created a supply glut. Gundlach says investing in natural gas now is similar to buying gold in 1997, when prices hit an 18- year low before a surge in the precious metal’s value.
The Standard & Poor’s GSCI Natural Gas Index increased more than 77 percent from April through Nov. 28, partly on demand from electrical utilities switching to gas from coal.
Even with timely calls like these, Gundlach has to overcome skepticism from investors that a bond guy can succeed in equities and other investments. DoubleLine, which had $39.8 billion in assets in its four bond funds as of mid-November, had gathered only $190 million for its Multi-Asset Growth Fund.
Lagging Returns
Started in December 2010, the fund includes natural gas exchange-traded funds, gold futures and currency and agriculture options as well as U.S. and international stocks. The fund returned only 4.3 percent in 2012 through Nov. 28, trailing the 14.4 percent gain in the Standard & Poor’s 500 Index.
“We have confidence that when the opportunities arise within fixed income, DoubleLine will be able to take advantage of that,” says Jeremy DeGroot, who helps oversee $8 billion in assets as chief investment officer of Orinda, California-based Litman Gregory Asset Management LLC. “When you go outside of fixed income into broader multiasset allocation, we don’t have that conviction. We haven’t done the work to give us confidence that they can successfully do it.”
Self-assured as ever, Gundlach says he’s indifferent to his reputation as someone without a track record outside of bond funds. “I couldn’t possibly care less; I don’t have anything to prove,” he says.
Morningstar Fight
Gundlach does care enough about what Morningstar opines that he’s now fighting with the mutual-fund industry’s preeminent rankings and research firm. In meetings, e-mails and phone calls, he has repeatedly complained to Chicago-based Morningstar’s executives that their analysts are biased against DoubleLine.
In a July 18 report on DoubleLine’s flagship fund, entitled “Swim at your own risk,” Morningstar senior analyst Sarah Bush cautioned investors about Gundlach’s use of volatile mortgage- backed derivatives such as inverse floaters, which are debt instruments whose coupon payments decrease when short-term interest rates increase.
DoubleLine co-founder Barach dismisses Bush’s concern, saying the securities make up less than 3 percent of the fund’s investments and have performed well over the past 20 years while also providing cash flow.
“Morningstar has been dead wrong on DoubleLine since December 2009,” Gundlach says, referring to the month he started the firm. “They don’t understand what I’m doing.”
Bush says she met with Gundlach in April. She says DoubleLine later declined to fill out a detailed questionnaire that would have helped explain the Total Return Bond Fund’s performance.
TCW Cheerleader
“We got a call saying they had cooperated enough,” says Bush, who stands by her analysis.
Gundlach also accuses Morningstar senior analyst Eric Jacobson of being a cheerleader for TCW, Gundlach’s former employer.
“What’s so reprehensible here is, Jeffrey called and said, ‘If I were you, I would fire Eric,’” says Don Phillips, Morningstar’s president of investment research and Jacobson’s boss. “Eric was one of the most early and ardent supporters of Gundlach.”
Gundlach’s quarrel with TCW began when the firm appointed then-Vice Chairman Marc Stern as chief executive officer over the objections of Gundlach and four other executives. They wanted to form a management committee to lead the firm. A TCW spokesman declined to comment for this story. Both the TCW and Gundlach lawsuits were settled in a confidential agreement at the end of 2011.
Art Passion
One subject the money manager is happy to talk about is art. His passion is on display throughout DoubleLine’s offices, with many of the paintings from his personal collection hanging on the walls.
In designing DoubleLine’s logo, Gundlach borrowed from Mondrian, the abstract Dutch artist whose career spanned almost five decades until his death in 1944. His works are characterized by grids of black lines, white space and rectangles in primary colors.
Gundlach began buying valuable art in the 1990s, favoring what he calls pretty pictures of landscapes. In 2002, he went to the Tate Modern in London and wandered into a room where he saw a Mondrian and had an aha moment. It was the first abstract work that he truly appreciated.
“I got it,” he says, snapping his fingers. “I was like, ‘I really like this thing.’”
Gundlach’s Painting
Gundlach says he likes how Mondrian’s paintings express balance without symmetry and achieve the elimination of figure and ground.
“They seem to exist at the scale of a galaxy,” Gundlach says. “Mondrian is able to capture the infinite and the finite.”
Today, visitors stepping off the 18th-floor elevator at Gundlach’s offices are greeted by a painting inspired by Mondrian that the money manager himself created. It features double black lines on a white background with a blue rectangle.
“My problem is, I’m too much of a perfectionist,” Gundlach says of the Mondrian-inspired pieces he’s made. “Mine are more perfect than the real ones.”
For all his braggadocio, Gundlach has a strain of humility, especially when it comes to his employees, corporate bond manager Baha says. In its early days, DoubleLine’s existence was threatened, as the TCW lawsuit and its potential liabilities scared away institutional investors, she says.
Fighting Tears
Fighting back tears, Gundlach stood before his staff of about 40 people and told them he felt responsible for their careers after they had left TCW to start DoubleLine, she says.
“He said he would walk if he proved to be a liability,” she says. “His firing made him more appreciative of family connections, friendships, people who stuck with him.”
Gundlach was forced to build his firm with retail investors, who were pouring into bond funds after the S&P 500 Index closed at 676.53 in March 2009, a 12-year low.
“We needed to show success quickly because of the litigation,” says Ronald Redell, president of DoubleLine Funds Trust, which offers funds to investors.
DoubleLine got help from Howard Marks, another former TCW star, who left the firm 17 years ago with four other distressed- debt experts to start Oaktree Capital Management LP. Oaktree, with $81 billion in assets as of September, bought a 22 percent stake in DoubleLine for an undisclosed price and assigned 60 of its people to help set up the firm’s back office and other support functions.
Under Attack
“Since we had started a firm ourselves, the founders of DoubleLine enlisted our help in their startup,” Marks says. “When you are under attack, you’ve got to take extra steps to make it 100 percent certain you won’t make a misstep.”
Whether three-year-old DoubleLine continues to thrive will rest largely on the investment instructions that Gundlach gives to his senior portfolio managers. They all debate the broad investment categories in which DoubleLine will place its bets during monthly asset allocation meetings in the Warhol conference room, named after the flamboyant pop artist.
Gundlach acts as the final judge, signing off on the percentages of investments of particular assets for the firm’s funds. Once he settles on a strategy, Gundlach leaves it up to his managers to execute the trading, with oversight but little interference.
“He’s very much hands-off,” Padilla says. “Once that allocation is made, he says, ‘You manage that portion.’”
Stolen Artwork
Hands-off, though, isn’t normally the first description that comes to mind when discussing Gundlach. In mid-September, thieves robbed the money manager’s Santa Monica home in a quiet residential neighborhood, taking more than $10 million in artworks as well as his red 2010 Porsche Carrera 4S, wine and watches. The robbers also snatched two works by Gundlach’s late grandmother, Helen Fuchs, who was an amateur painter.
The money manager first offered $200,000 for tips leading to the recovery of his art and days later boosted the reward to $1.7 million. Santa Monica Police Department Sergeant Richard Lewis says the large sum of money was key to cracking the case, which the Federal Bureau of Investigation assisted on.
In late September, two suspects were arrested and all of the stolen art was recovered.
The cerebral Gundlach also gave investigators a tip for solving the crime. He says that while he was at home in his family room, it dawned on him that thieves would do a Google search using his grandmother’s name to find out more about the paintings and how much they might be worth.
Gundlach told the authorities that they should check the Internet to see who might have googled the name Helen Fuchs. He says exactly two such searches were executed: one by him and one by the thieves.
Gundlach says his Internet idea impressed investigators.
“The FBI,” he says, “thought it was brilliant.”
Ezekiel Emanuel and his charnel house
Posted on August 15, 2009 | 1 Comment
http://xcontra.wordpress.com/2009/08/15/ezekiel-emanuel-and-his-charnel-house/